Building Societies body urges Bank to hold firm on rates
The Bank of England’s Monetary Policy Committee should not move to decrease the base interest rate further from its already record low level, as this would be a “further blow to hard-hit savers” and would serve little economic benefit, according to the Building Societies Association.
Paul Broadhead, head of mortgage policy at the BSA, said in the trade body’s report on gross lending figures for the first half of 2012 that the current low interest rate environment was making it “challenging to save”.
He said that in this context the revelation that the MPC had considered decreasing the rate further at its June meeting was a concern, adding that “with rates already so close to zero, we judge it would anyway have little impact on demand in the economy.”
Mr Broadhead added, however, that BSA figures showed an increase in mutuals’ savings balances in June, which he said “was a significant improvement compared to the same month last year”.
In the report the BSA data show that, in the first half of 2012, gross mortgage lending by building societies and other mutuals was £14.1bn, up 38 per cent compared to the £10.2bn recorded in the same period in 2011.
The statistics revealed lending rose 28 per cent to £2.7bn in June 2012, up from £2.1bn in the same month of 2011. Net lending by mutuals was £2.7bn in the first six months of 2012 and £700m in June 2012.
Mortgage approvals by mutuals were up 45 per cent in the first six months of the year compared to the same period in 2011. In June, approvals were up by 35 per cent compared to the same month last year and were 20 per cent higher than the average over the previous six months.
Retail savings balances at mutuals increased by £639m in June 2012, compared to a net withdrawal of £94m in the same month last year.
Mr Broadhead said lending by mutuals has grown in each month of this year on a year-to-year basis and the June figures for mortgage approvals are above the previous six months’ average.
He said: “This means that lending by mutuals looks likely to continue to be strong in coming months.
“Growth in lending by banks over the past six months has been relatively weak while the economy remains in recession. In contrast, mutuals have demonstrated their commitment to lend, and are currently offering some of the best rates available in the market.”